LAW: Re; Class Action Lawsuits

Law Professor Bert Westbrook delivers an opinion about the debate concerning his profession; "As a law professor who has written on the subject ("Liberal Environmental Jurisprudence", U.C. Davis Law Review.), I've followed this discussion with considerable interest. Without taking sides (though I incline slightly to Rob's position), I find the argument far too schematic. Let me try and give some inkling of why our current structure makes some sense, and the sorts of judgments one would want to make in order to decide whether/how to reform the system. Consider the following points, which should add up to a sort of regulatory matrix:

1. Suppose A injures B (and presume that B has a right against such injury). Then B has a tort (in civil law, delict) claim against A. This has been the law since there has been law, and I don't think is up for grabs.

2. Now, suppose that B is poor, and can't afford to front the money to a lawyer. You might want to (1) encourage pro bono work; (2) tax and spend (court provided lawyers in criminal cases); (3) provide contingency fees, that is, let lawyers decide which cases to bring, and invest accordingly.

3. Suppose that A's activities typically/regularly have the potential to hurt people, but are basically beneficial, and therefore should be allowed. The operation of most businesses fits into this category. You might want to impose a system of regulation, in which a bureaucracy oversees the activity in question.

4. Suppose, plausibly enough, that the bureaucracy has limited resources. You might want to enlist the tort system in order to ensure the enforcement of the regulations. This is very common in labor, environment, and securities law, in which private plaintiffs can sue to enforce regulations. This is more common in the U.S. than in Europe; it is widely believed to result in better compliance, of course, at a cost.

5. Suppose that it is difficult to win such cases, but that A's abuses are harmful to society. You may want to increase the awards that plaintiffs can win over the monetizable value of the damages they actually suffer. The classic example is the treble damages allowed in antitrust cases, which are very difficult to win. Punitive damages (and, in practice, pain and suffering) also allow plaintiffs to win more money.

The critically important point for our system, however (and the one Rob should pay more attention to) is not what does the plaintiff get (the insurance concern), but what costs are imposed on the defendant. (There are more efficient ways of taking care of insurance concerns than the tort system.) The question, however, is what is the regulatory purpose of, and effect achieved by, the tort judgment?

6. Suppose that the regulatory regime does not work. There are many reasons for this, including regulatory capture (agencies tend to get too close to the regulated community), outright corruption, and behavior that regulation does not address (sometimes due to lobbying and special interests, vide the accounting industry's failure to adopt a number of standards). Then you might want the judicial system to operate separately from the regulatory regime. The Exxon Valdez was litigated largely common law tort, not environmental or transportation regulation. More broadly, much of the civil rights battles were fought in the federal courts, because state and local governments, particularly in the south, were not enforcing civil rights.

7. Suppose, finally, that the harms suffered are too small (diffuse) to be worth litigating. As Lincoln said, avoid litigation. Or suppose the cases are incredibly complicated (drugs, asbestos, tobacco, Agent Orange, toxic torts, etc.) that individual plaintiffs or even law firms cannot bear the cost of litigation. The cost and bother of litigation creates an incentive for companies to do widespread harms, "impose negative externalities" in the economic jargon. One classic response is the aggregation of claims, the "certification of a class" of similarly situated plaintiffs. Even if the harms are serious, it is often a good idea for society and the courts to handle similar cases at once. In either case, you might want to provide for class action lawsuits.

Each of these legal/institutional ideas is a good idea, in the abstract (although there are philosophical problems, too, consider separation of powers and individualist concerns). But our institutions don't live in the abstract. In practice, each of these responses addresses an old problem, as I've tried to illustrate. But the problem may be more or less effectively solved, and, as lots of postings have suggested, such institutional devices often create new problems, as well.

So the point is not that lawyers are heroic/dishonorable, corporations are good/bad, courts are effective/meddlesome, regulations are necessary/inefficient -- the schematics of this discussion don't get us anywhere. All of these things are from time to time true. The question is what mix of institutions seems to be working, and what needs improvement. Clearly, for example, accounting is broken. My less educated sense is that U.S. drug testing works pretty well, and that medical malpractice and other personal injury torts are too difficult for ordinary individuals to bring in most civil law countries. But such judgments are hard to make, very hard to ground in real knowledge of an area and what is possible, and cannot be made in the abstract".